According to Taiwo Oyedele, the current tax gap stands at an alarming 70 to 75 per cent.
Nigeria has the potential to quadruple its revenue if it can address widespread tax non-compliance, the Chairman of the Presidential Fiscal Policy and Tax Reform Committee, Taiwo Oyedele, has said.
Speaking Monday at the 30th edition of the Nigerian Economic Summit, Mr Oyedele outlined the need for urgent tax reforms, stating that the country is losing significant fiscal opportunities due to rampant tax evasion and an overly complicated tax regime.
He argued that the current tax gap stands at an alarming 70 to 75 per cent, meaning that if all eligible taxpayers met their obligations, the country's revenues could be four times higher than they are today.
"The issue is not just policy but compliance. If we can close this gap, imagine the fiscal space we could create - we wouldn't be facing the budget deficit that continues to fuel inflation and hamper growth," he said.
Citing a study conducted by the Nigerian Economic Summit Group (NESG), Mr Oyedele noted that only 17 per cent of Nigerian adults pay their taxes, with the figure for businesses standing at 31 per cent.
"People don't trust the government to use the revenue effectively, and two-thirds of taxpayers have reported being asked for bribes in the process of paying taxes," he said.
He also criticised the complexity of Nigeria's tax system, citing over 60 official taxes and levies, with the unofficial count exceeding 200.
"We stopped counting at 200 because new taxes seem to be invented daily. This kind of system only burdens the economy without delivering the intended benefits."
He highlighted the inefficiency of Nigeria's tax administration, where more than 60 different agencies are tasked with collecting revenue.
"Most of these agencies were never designed to collect taxes. They add unnecessary layers of complexity, which burdens businesses and fails to deliver the expected revenues to the government," Mr Oyedele explained.
In addition to simplifying the tax regime, he advocated the creation of a national tax portal that would allow for greater transparency in tax collection and public spending.
He suggested the adoption of models like South Africa's Municipal Money platform, which provides a transparent view of local government budgets, spending, and audited accounts.
"This would help to restore the public's confidence in the government's ability to manage tax revenue effectively," he said.
Fiscal Policy
Addressing the broader issue of fiscal policy, Mr Oyedele called for reforms that go beyond taxation saying tax is a consequence of economic activity, and any policy that distorts economic activity or undermines the well-being of citizens is bad.
He emphasised the need for a comprehensive approach that harmonises tax laws, streamlines spending, and ensures borrowing is within sustainable limits.
According to him, fixing this broken system is essential if Nigeria is to realise its full economic potential.
Without these reforms, he said Nigeria will continue to face an economic situation where growth is stifled, public trust eroded, and the country remains unable to meet its development goals.
Tax reforms
Mr Oyedele also said the government is introducing comprehensive tax reforms aimed at reducing the financial strain on businesses and protecting low-income earners.
According to him, businesses will benefit from significant tax relief, including a 100 per cent VAT credit on assets and services, which will lower operational costs and, consequently, consumer prices.
Sign up for free AllAfrica Newsletters
Get the latest in African news delivered straight to your inbox
Additionally, the corporate income tax rate is set to drop from 30 per cent to 25 per cent, with reforms expected to take effect in January 2025, pending legislative approval.
He said the federal government is rolling out a progressive personal income tax structure. Workers earning less than N1.5 million monthly will either experience a tax reduction or be completely exempt, while higher earners will face incremental increases, with the top rate reaching 25 per cent.
He said the approach aims to balance fiscal needs without overburdening the lower and middle classes.
To further ease the cost of living, VAT on essential items--including food, healthcare, education, accommodation, and transportation--will be reduced to 0 per cent, he said.
This measure, he said, will ensure that necessities remain affordable while businesses can reclaim VAT paid during production, ultimately benefiting both consumers and enterprises.
